News

Judge Rules To Dismiss Novell Antitrust Lawsuit Against Microsoft

• By Kurt Mackie
• July 17, 2012

An order issued by a U.S. district court judge on Monday halts Novell's lawsuit against Microsoft over the alleged hobbling of WordPerfect in 1995.

Judge J. Frederick Motz issued an opinion from the Utah Central Division court that granted Microsoft's Rule 50 motion, essentially dismissing the case. Rule 50 allows for the judge to make a decision in hung jury cases, which is called a "judgment as a matter of law motion." The case had gone to a jury previously, which failed to reach a verdict in December 2011, but the final jury count at that time was 11 to one against Microsoft. The case had been whittled down to a single claim that Microsoft violated Section 2 of the Sherman Act by monopolizing the software applications market. Novell was seeking nearly $1 billion from Microsoft.

Judge Motz offered this explanation for his ruling in Microsoft's favor.

"Although Novell presented evidence from which a jury could have found that Microsoft engaged in aggressive conduct, perhaps to monopolize or attempt to monopolize the applications market, it did not present evidence sufficient for a jury to find that Microsoft committed any acts that violated § 2 in maintaining its monopoly in the operating systems market," Motz wrote in his opinion (PDF).

The case stems back to the days when Microsoft was in the early stages of launching Windows 95, and when WordPerfect was more widely used than Microsoft Word. Novell is the plaintiff in the case because of this chronology, although the WordPerfect product underwent a series of corporate ownership changes, including ownership by Corel Corp. in 1996. Novell itself was bought by Attachmate Corp. in November.

At the end of 1994, the use of WordPerfect on DOS and Windows constituted 36 percent of the word processing market. Novell had alleged during the trial that Microsoft deliberately withdrew namespace extension APIs for Windows 95 with the intent of thwarting its software application competition, specifically to give an edge to the Microsoft Office suite on Windows 95 over competing suites.

That's pretty much what then-CEO Bill Gates said Microsoft should do in a smoking-gun memo, dated Oct. 3, 1994.

"I have decided that we should not publish these extensions," Gates wrote in the memo (PDF, courtesy of Groklaw, which provides analysis of the case). "We should wait until we have a way to do a high level of integration that will be harder for the likes of Notes, Wordperfect to achieve, and which will give Office a real advantage."

The namespace extension APIs were out at the beta level at that time. While Novell's attorney's claimed that Microsoft's beta status for the namespace extension APIs meant that the features were fixed, that's not the understanding about Microsoft's betas that people generally have today. However, Gates' memo clearly showed intent to trip up the competition by withdrawing the APIs.

Surprisingly, Judge Motz thinks that's not antitrust behavior under the Sherman Act.

"A monopolist is free 'to exercise [its] own independent discretion as to parties with whom [it] will deal'," Motz wrote, citing some case law. "It is well established that a monopolist generally has no duty to cooperate with its competitors."

In the software world in which many applications run on a just a few operating systems, this interpretation of the law by Judge Motz might be construed to give Microsoft total monopoly market power over applications that run on Windows. If Microsoft has competing application products, it can just refuse to cooperate technically with software vendors that write for Windows, thereby gaining market advantage -- and that's completely legal under antitrust law, according to Motz.

Novell, for its part, plans to appeal the ruling.

"While Novell is disappointed with Judge Frederick Motz's ruling, Novell still believes in the strength of its claim and we do intend to pursue an appeal," stated Jim Lundberg, vice president of Novell's legal department, via e-mail.

Microsoft applauded Motz's ruling.

"We've maintained throughout this case that Novell's arguments lack merit, and we're gratified with today's ruling dismissing the last of Novell's claims and putting this matter to rest," said David Howard, deputy general counsel at Microsoft, in an e-mailed statement.